Buffett Defends Dimon, Says Regulators Take Ton of Flesh

Chairman and CEO of Berkshire Hathaway Inc. Warren Buffett said, “You are in a terrible negotiating position, and I’ve been in that position. If they want to take a pound of flesh, they can take a pound of flesh. But if they want to take a ton of flesh, they can take that, too.” Photographer: Andrew Harrer/Bloomberg

Oct. 16 (Bloomberg) -- Billionaire investor Warren Buffett
said JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon
will withstand litigation and legal probes that led his bank to
take a $7.2 billion charge in the third quarter.

“If a cop follows you for 500 miles (800 kilometers),
you’re going to get a ticket,” Buffett, the chairman and CEO of
Berkshire Hathaway Inc., said today in an interview on CNBC.
“And believe me, you’ve had a lot of cops that have been
following a long time, and they’re going to write some
tickets.”

Dimon, 57, is grappling with regulatory investigations
ranging from mortgage-bond sales practices to hiring methods in
Asia. The New York-based bank is also tightening controls amid
probes into botched credit-derivative trades last year.

Banks rely on so many licenses that the threat of criminal
charges can undermine their business, Buffett said. The
billionaire served as interim chairman and CEO of Salomon Inc.
in 1991 and 1992 as the company sought to recover from
involvement in a Treasury debt auction scandal.

“A large financial institution just can’t take that,” he
said. “You are in a terrible negotiating position, and I’ve
been in that position. If they want to take a pound of flesh,
they can take a pound of flesh. But if they want to take a ton
of flesh, they can take that, too.”

Dimon concurred with Buffett’s assessment of banks’
inability to sway regulators last week during a conference call
with analysts. Still, he vowed to push for outcomes that would
be fair to investors.

Dimon’s View

“It is very hard to fight with your regulators or the
federal government, but we want them to be fair and
reasonable,” Dimon said. “We have shareholders.”

Buffett, 83, has said he personally owns shares of
JPMorgan. Omaha, Nebraska-based Berkshire also holds stakes in
some of the nation’s largest banks, including Goldman Sachs
Group Inc., Bank of America Corp. and Wells Fargo & Co.

JPMorgan’s third-quarter loss was $380 million, marking the
bank’s first unprofitable period under Dimon. The company’s
stock advanced 19 percent this year through yesterday, matching
the gain in the Standard & Poor’s 500 Index.

“Jamie will survive it fine,” Buffett said of the
regulatory scrutiny. “He knows how to run a bank.”